Watching bonds
REUTERS/Kevin Lamarque The Federal Reserve headquarters in Washington

US interest rates are going up. Futures markets expect the fed funds rate, which is now 2.2 per cent, to rise to almost 3 per cent by the end of next year. They believe this largely because the Fed has told them to do so. It has said that if growth and inflation turn out as expected it will raise the funds rate to just over 3 per cent by next December. Whether we should worry about this – and what we should do about it – depends heavily upon how bond markets react.

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